Many Australians choose to invest in property to secure their retirement, and why not — it has performed exceptionally well in our lifetimes. Or has it?
In the past year, property has rebounded strongly. The S&P/ASX 200 (ASX: XJO) (^AXJO), is up 18%. In the past decade, property has done very well but the share market is 66.9%. Here's a good example of how stocks can make you rich. If $1 were invested in the Australian stock market in January 1900, it would now be worth approximately $300,000!
Regardless of whether you like, or understand, stock market investing, the chances are you'll have to. Compulsory superannuation in Australia now accounts for $1.6 trillion and many managed funds will have at least some of your super in shares — but you're not likely to see the types of gains above if you let someone else take control of your money.
Here are five stocks that anyone could buy today that I think will provide a stable income stream and modest growth prospects.
One stock I'm banking on for the very long term is Challenger (ASX: CGF). Challenger provides fixed income security for retirees. With pooling super accounts and more people entering retirement, it has a stable dividend and long-term prospects are good.
Telstra (ASX: TLS) is the market sweetheart for long-term investors because it pays a dividend better than term deposits and offers up modest long-term growth. Although its number of Australian customers still grows, it's slowing, but it has a perfect base to leverage itself for international expansion.
Health insurance provider NIB Holdings (ASX: NHF) is another stock that pays a stable dividend but has a view to securing long-term shareholder wealth. NHF has a five-year average annual shareholder return of 35.7%. Try getting that from a term deposit!
Although I believe many big miners are not a buy at current prices, I've heard it's un-Australian not to hold a resources stock in your portfolio. The world's reliance upon and need for natural resources (whether in computer systems, aircraft or skyscrapers) will always persist. One stock for such a trend is BHP Billiton (ASX: BHP). As Australia's biggest and most diverse resources stock, lifelong investors should find a position for it in their portfolio.
However, in the future Australia's economy may be forced to adapt to lower resources exports and parts of the "non-mining" economy will have to fill the void. Australians are well-educated and we have the right regulations and infrastructure in place to translate our learning into a product. Biotechnology will play a big part in our country's future. CSL (ASX: CSL) is well placed to take advantage of this trend.
Foolish takeaway
Too many people don't understand where their money is invested, but simply taking the time to understand your superannuation investment strategy or taking control of your own finances could reap huge benefits to your wealth in years to come. However it's important to understand that stock markets, to a greater extent than Australian property, will rise and fall dramatically. It's important to buy good companies which will survive market crashes and be stronger as a result.
